PCI Expresses Concerns on States’ Credit Scoring Study

May 5, 2004

  • May 5, 2004 at 1:24 am
    Nancy says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    I do think this should be looked at by regulators. Many companies use different criteria which does not seem right. Also, some low income people, who still pay on-time, get only good or satisfactory because they do not have larger incomes. This does not mean they will be careless or put in any more claims.

  • May 5, 2004 at 2:06 am
    Raymond( Buddy) Miles Jr says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    I think it’s another way the insurance
    companies can raise rates, without approval from State Depts of Insurance.

  • May 5, 2004 at 2:14 am
    Steve says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Sorry Nancy, but I do not agree with your points.

    Insurers are not using scoring in such a finite way that rates vary drastically between scores that are relatively close. Income will not drastically move a credit score up or down.

    Regulators have no basis to look deeper into the use of credit derived info than they have to look at age or gender. Every company should be entitled to use the info and rate it differently. Every company is looking for their own advantage, so I may see value in seeking out risks with one profile while another insurer may have the competitive advantage against a different risk profile. Let every company find their competitive advantage and exploit it, as long as they are not breaking the law. And an insurers use of credit information is not illegal- even more so when it is one of many factors used. An insurance company would have to be crazy to base their rates solely on insurance scores, and I suspect they would not last long.

    There are a number of benefits to insurance score use.
    Insurance scoring can help make insurance more affordable by allowing insurers to more accurately price. Also brings in fairness in pricing as pricing is not based on factors that correlate weakly with loss experience. In fact, some factors may be more discriminatory in nature than scoring. Scoring is much more strongly correlated with loss experience.

    Most people have good credit and can benefit from insurance scoring. Scoring allows insurers to charge lower rates since they can more accurately price. More often than not, consumers qualify for lower insurance rates and in some cases, even offset a less than perfect driving record.

    PCI touts that “policyholders with positive credit information are less likely to incur losses. Combined with familiar factors such as years of driving experience, previous crashes, and the age of your vehicle or home, insurance scores are another way for insurers to differentiate between lower and higher insurance risks.”

    It is important to note that insurers consider credit information differently than banks and other lenders. In financial institutions like banks credit scores are used to determine an applicant’s ability to repay a loan. Meanwhile, insurers use insurance scores to predict the likelihood of future losses. While credit scores and insurance scores take into consideration many of the same items in credit reports, they tend to analyze the credit characteristics differently, using different weighting factors. Each industry has different intents in how they use the info derived from credit reports.

    As PCI has indicated on their website, “there’s a strong connection between credit history and claim filing. Independent studies have proven a 99 percent probability that there is a connection between insurance scores and the likelihood of someone filing a claim. Studies released by the University of Texas and EPIC Actuaries in 2003 reaffirmed this finding. The EPIC study also demonstrated that insurance scores are among the three most important rating variables used by insurers. These studies highlight the accuracy of the tool and its usefulness in helping to ensure that the price of insurance more closely corresponds to the consumer’s risk of loss.”

  • May 5, 2004 at 2:37 am
    Peggy says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    I am a single parent – live in a small town. No I do not have a large in income. I have had 1 comp. claim in the last 5 years. I have a low insurance score – I do not believe that they even consider your loss history when apply a score. I also work in an insurance agency. I have seen some cases where an indvidual cannot even submit an application to a company becasue his/her insurance is to low. Right here we have DISCRIMINATION!!!!!!!!!!!!!!!!

  • May 5, 2004 at 2:39 am
    Jere Allan says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    I have been in the business for 42 years. Why, just in the past 5 years, has credit scoring become such a great crystal ball? Insurance has undergone a great philosophical change. No longer do companies exist to pay claims, but they exist to make money for the shareholders. Because of such change, the industry invites government into their business, then wonders why. Even the small, rural agencies, the backbone of the profit columns, are no longer wanted.

  • May 5, 2004 at 2:41 am
    Linda says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Sorry, Steve
    I strongly disagree. I write 90% non-standard auto and continually see cases where a person with 3 OWI’s or a couple accidents and an excellent credit score will pay $200- $300 less than a person with poor credit but a clear record. This doesn’t make sense.

  • May 5, 2004 at 3:39 am
    RAC says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    – I agree with Linda, Peggy & Buddy … I have been a claimsman for 35 years and this is a cost cutting shortcut to avoid real underwriting decisions.

    – Additionally, there will be no cost savings as advertised, just look att he population distribution on credit scores … this will be a non-rebuttable way to raise rates as apart of an unjust enrichment scheme.

    – This is another fraud perpetrated on the gulible public and it will unfairly punish minorities and the economic disadvantaged.

    – I have handled claims for all economic classes and those with a high credit score are just as difficult as any other with alower credit score.

    – The lenders have seen this and are abandoning ther NINA loans with high credit score applicants that have little other underwriting criteria, finding they are 12 times more likely to default than a lower rated credit scores. A funny coincidence … I think not … I suspect that liars can figure and figures can lie.

    End…

  • May 5, 2004 at 3:39 am
    RAC says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    – I agree with Linda, Peggy & Buddy … I have been a claimsman for 35 years and this is a cost cutting shortcut to avoid real underwriting decisions.

    – Additionally, there will be no cost savings as advertised, just look att he population distribution on credit scores … this will be a non-rebuttable way to raise rates as apart of an unjust enrichment scheme.

    – This is another fraud perpetrated on the gulible public and it will unfairly punish minorities and the economic disadvantaged.

    – I have handled claims for all economic classes and those with a high credit score are just as difficult as any other with alower credit score.

    – The lenders have seen this and are abandoning ther NINA loans with high credit score applicants that have little other underwriting criteria, finding they are 12 times more likely to default than a lower rated credit scores. A funny coincidence … I think not … I suspect that liars can figure and figures can lie.

    End…

  • May 5, 2004 at 3:46 am
    Hans says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Steve’s 100% wrong.

    First of all, all insurance companies raised based rates, in most cases 40% or more, so they could offer bogus ‘discounts.

    The vast majority of people getting a ‘discount’ actually saw a rate increase. Also, insurance companies refuse to divulge what criteria they use to obtain a credit score…What are they hiding???

    Credit scoring works because it’s high-tech red-lining and VERY profitable.

    Last but not least, I’ve never met an agent or insurance company representative who could explain what criteria goes into their credit scoring guidelines.

  • May 5, 2004 at 3:59 am
    marshall j. mcwilliams says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    there should be a law against using credit scoring to obtain insurance and in setting rates. why? why do you need credit scores to set insurance rates or to get insurance? this is criminal.



Add a Comment

Your email address will not be published. Required fields are marked *

*